It is often quite difficult for professionals to get a sense of what hard money is all about and to know when it is the best option for putting a transaction together. I have found that the best way to teach is by example. So to that end I will profile several loans here that we have placed.
A Real Bargain
We had a Loan Broker bring us a transaction involving the purchase of a rather unusual multi-unit complex in Lebanon. The borrower had locked in a purchase price of $230,000 for the property, and was buying it as an investment. He was getting discouraged because he felt that he was buying this property for way under market value and he was eager to complete the transaction, but the Loan Broker had been having a tough time putting the transaction together due to (1) the required LTV based on purchase price, (2) the unusual nature of the property (several single family homes, a duplex, an 8-plex, and a large commercial property all on two tax lots), and (3) the lack of a proper commercial appraisal. We took a look at the file and then the property and got very excited about the transaction. This was a property, in our opinion, that was easily worth as much as $500,000 (based primarily on an analysis of potential income; no wonder the borrower was nervous). We arranged to loan to the borrower–enough to cover the purchase price, fees and closing costs, and an additional construction fund to be used for completion of deferred maintenance on the property, and the LTV was based on completion value as opposed to current value. The borrower was able to come in with a relatively small down payment to make the loan work.
A Row House Project
I had a contractor call me up. He was quite discouraged, because he had arranged all of the elements for putting up a four unit row house project in Southeast Portland and had gone to a local Loan Broker and after nearly two months, was not any closer to having his project funded and was in danger of losing the option to buy the lots for the project. By the time he got to me, he had just over a week to complete the transaction. I felt good about the contractor and good about the project, so I hustled to put it together. We made the deadline and those units are going up right now.
An Idaho Ranch
I had a file come onto my desk from two different sources on the same day (my Account Executive and a Loan Broker who I have known and done business with for several years). Once again, a borrower was in danger of losing the right to purchase a property that was of great importance to him. He was a strong borrower with good credit and strong assets but he needed funding for the purchase of a cattle breeding ranch in backcountry Idaho and he needed it in one week. There was no way to extend the purchase agreement, so I booked the first available flight to Idaho, rented a car in Boise and drove five hours to look at the property. All the while, I was in direct contact with my office by cell phone where my right hand man was preparing the documents and coordinating with the title company so as to complete this loan on time. We made the deadline, funded the loan at an LTV acceptable to all parties, and our borrower is now the proud owner of a cattle breeding ranch in Idaho.
These are a few examples of the loans that we do. In the end, with hard money, it is always about equity. The important thing to remember is that if the equity is there to support the loan we can move fast and overlook a number of otherwise undesirable factors.
– Clay (clay@privatemoneysource.com, 503-476-2909)
Clay is Vice President of Fairfield Financial, a primary source for private money since 1964. Fairfield is currently targeting loans in OR, WA, AK, CA, CO, ID, FL, GA, ID, MT, NV, NY, OK and TX. To submit a loan to Fairfield for consideration: http://www.privatemoneysource.com/loanproposal.php
Tags: Commercial loans, construction loans, hard money borrowing, hard money brokering, hard money loans, Idaho, Multifamily, Oregon, private money borrowing, private money brokering, private money loans, real estate, real estate investing, rehab loans
